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On Tuesday, Jefferies analysts downgraded TPI Composites (NASDAQ:TPIC) stock from Hold to Underperform, significantly reducing the price target to $0.50 from the previous $2.30. The firm highlighted concerns about the company’s accumulating payment-in-kind (PIK) debt and the potential necessity for an equity dilution event to manage its financial situation. InvestingPro data confirms these concerns, showing the company may have trouble making interest payments on debt, with a concerning current ratio of 0.94.
TPI Composites, a manufacturer of composite wind blades, is facing challenges due to its high leverage, with debt to EBITDA ratio expected to be 7.0x in 2026. The company’s total debt stands at $742.25 million, representing 93% of total capital, while posting negative EBITDA of $50.05 million in the last twelve months. According to Jefferies, this level of leverage is concerning, especially given the risks associated with the company’s operations in Turkey and the lack of expected meaningful EBITDA improvement from 2026 to 2029.
The firm’s analysis suggests that TPI Composites’ EBITDA margins for 2025 and 2026 could be 200 and 100 basis points below consensus estimates, respectively. This is primarily due to the aforementioned risks and the company’s inability to significantly improve margins in the near future.
Jefferies emphasized that until management can find ways to enhance margins and address the debt issue, the stock is likely to remain under pressure. The revised price target of $0.50 per share reflects these concerns and the anticipated challenges TPI Composites may face in the medium term.
In other recent news, TPI Composites has announced a restructuring plan that involves reducing its workforce by approximately 20% at its Turkish manufacturing facilities. This decision is a response to decreased demand for wind blades in Europe, exacerbated by a hyperinflationary environment in Turkey. The company expects pre-tax charges between $9 million and $11 million for severance and other termination benefits, which will be paid out in January 2025. In addition, Stifel analysts have maintained a Hold rating on TPI Composites, citing ongoing uncertainty in Turkey as a significant factor affecting the company’s prospects. Despite these challenges, the analysts highlighted strong recent utilization rates as a positive indicator for the company’s medium-term fundamentals.
Meanwhile, GE Vernova experienced a decline in its shares, alongside other wind energy stocks, following comments from President-elect Donald Trump opposing new windmills in the United States. This political stance has raised concerns about potential shifts in policy that could impact the renewable energy sector. The market reaction reflects investor apprehension over future government support for wind power. These developments underscore the complex environment faced by companies in the wind energy industry, as they navigate both geopolitical influences and market dynamics.
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